NFLX vs XLC Divergence

By Bennett Tindle October 12th, 2022

Shares of $NFLX have continued to gain strength and momentum relative to the Communication Sector, with divergence beginning in August.

As you can see in the chart above, while the Communication sector moved sharply to new lows, shares of $NFLX traded sideways in what appears to be bullish consolidation.

Eventually one of the two will play catch up.

If the sector is going to play catch up, we should see its upside reversal coincide with the completion of the downside move in the indexes.

And alternatively, if $NFLX is going to turn back to the lows, we’ll know extremely soon thanks to its current uptrend invalidation level seen below.

Zooming in on recent price developments from the May 12th low, we can see what may be a 5-wave move in development.
— 5-wave moves are important, as they help establish larger trends —

The alternate interpretation would say the move up was a corrective 3-wave rally, similar to what happened in the major indexes between the June lows and August highs.

Regardless of which interpretation is accurate, we can apply the same trend confirmation technique that I used in August to signal a move to new lows in the indexes.

So in this case, that means if this really is the start of a larger upside rally, then $NFLX must remain above 207.38 on a closing basis.

And if we break 207.38 to the downside, we’re on our way back to the lows.

I’ll be talking about this very trade setup tomorrow on our special webinar event, so be sure to check it out below and tune in if you are able to join!

Regards,
-Bennett Tindle | Chief Analyst | TradingAnalysis.com | @eWavePilot

LIVE Market Analysis WEBINAR Thursday, October 13th, 2022